Cadillac tax may hit over 25% of employers starting in 2018

By Claire Thayer, September 2, 2015

One of the provisions of the Affordable Care Act is the high-cost plan tax (HCPT), aka the ‘Cadillac’ tax,  will be imposed on health insurance companies as well as sponsors of self-funded group health plans beginning in 2018.  Plans that exceed cost thresholds will incur the excise tax.  For 2018, cost thresholds are $10,200 for an individual (single coverage) and $27,500 for family. The excise tax is 40% of the amount that exceed these thresholds.

A recent analysis by the Kaiser Family Foundation of the impact of the Cadillac tax on employers summarizes the overall cost for each employee to include:

  • The average cost for the health insurance plan (whether insured or self-funded);
  • Employer contributions to an (HSA), Archer medical spending account or HRA;
  • Contributions (including employee-elected payroll deductions and non-elective employer contributions) to an FSA;
  • The value of coverage in certain on-site medical clinics; and
  • The cost for certain limited-benefit plans if they are provided on a tax-preferred basis.

This same study estimates that in 2018, over 25% of employers offering health plan benefits may be subject to the Cadillac tax, and by 2028, as many as 42% of employers will incur this excise tax:

As employers look for ways to save costs, the Cadillac tax will have a huge impact on flexible spending accounts (FSAs), with some analysts conjecturing that this could lead to the demise of FSAs, as reported last week on Politico. Expect employers to make benefits changes during the open enrollment season for both this year and next. For more in-depth discussion, the Kaiser Family Foundation’s August 2015 Issue Brief will be insightful.


More About Us, Less About Them

By Kim Bellard, September 1, 2015

Something Amazon just did is worth those of us in health care paying attention to.  It was the layoff of "dozens" of engineers at Lab126, Amazon's hardware development center, as first reported by The Wall Street Journal.  These were the first layoffs in the division's history.

Lab126 is responsible for Amazon's consumer devices, including their very successful Kindle e-reader and the new Fire TV. What makes this is a cautionary tale for the rest of us is that even Amazon -- which is noted for their prowess with their online consumer experience -- can't necessarily get the physical consumer experience right.  I think Wired captured the problem best, asserting that Amazon's consumer devices would have been more successful "if Amazon focused more on consumers, and less on consuming."

Now perhaps the relevance to health care may be clearer.

Consumer devices are all the rage in health care.  The global mHealth market is predicted to be $49b by 2020, with some 73 million units shipped in 2015 and an eye-opening CAGR of 47.9% expected from 2013 to 2020 (although other analysts already see slowing demand).

At the core of Amazon's devices is the goal to, well, get consumers to buy more stuff from Amazon.  
So I wonder: what is the goal of consumer devices in health care?  Are they intended to help us achieve better health -- or to consume more health care services?  I hope for the former but I fear it may end up being the latter.

I was struck a couple of weeks ago by an opinion piece in JAMA: "Obstacles to Developing Cost-Lowering Health Technology."  It's authors, doctors Kellerman and Desai, note that:

The inventor’s dilemma is that creating a product that improves health is not enough; the product must also be able to generate a healthy return on investment. In the United States, the surest way to generate a healthy return on investment is to increase health care spending, not reduce it.

Think about the terminology used in health care.  It speaks volumes about the underlying culture and its attitudes towards us.  Health care providers call us "patients."  Health plans call us "members."  Medicare and Medicaid call us "beneficiaries."    The name for one of the newest fads -- "patient centered medical homes" -- serves to remind us that we're not normally considered the center of our health care, and that the focus is on our medical care, not our health.

At least "consumer-directed health plans" pay lip service to us being in charge.

I'm all for people and organizations making money in health care, but I don't like to be seen as some kind of ATM for them either.  The health care industry needs to realize that we don't really want to be its customers, don't want to need to consume their services, and certainly don't want to have to be unduly patient about it when we do. 

What we want is to be healthy.  Give us the devices, services, and experiences that make that as simple as possible and then you can call us whatever you want.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting


Independent Pharmacy Accountable Care Organizations 

By William DeMarco, August 26, 2015

The competition for Pharmacy Services has become brutal as large chain stores such as Walgreens and CVS, as well as big box stores like Target and Walmart, attempt to develop exclusive service contracts with large insurance carriers and Pharmacy Management Companies (PBMs). At the same time, employers are faced with rapid increases in specialty drug costs for diseases such as Hepatitis and similar chronic illness drugs that may cost as much as $50,000 to $75,000 per year.

For example on July 24th the FDA approved a new class of cholesterol lowering drugs known as PCSK9. Many health plans were anticipating a price point of $10,000 per year, but the approval came with a recommended $14,600 annual price target. This would translate to a $6.71 per-member, per-month (PMPM) for Commercial and a $15.16 PMPM for Medicare, depending on the patients other conditions according to a Prime Therapeutics public analysis released in June.

While the clinical side of this evaluation proves these targeted drugs do work, the cost to public and private payers is changing the landscape of how employers deal with these services.

PBMs initially established a very good solution for a very complex problem by integrating costs, necessity and quality with outcomes. However, the mark up on PBM services and ability for PBMs to buy wholesale and resell retail has made some employers believe there may be better options they should consider.

In addition, the generic substitution strategy that saved employers millions in the early 1970s has worn away and generic prices are climbing - making the spending for both specialty and routine pharmacy a very large concern.

One solutions being attempted in several areas around the country is the development of an Accountable Care Organizations (ACO) like network of independent pharmacists.

In this segment of the delivery system, most pharmacies are owned by one or more families and are often one man drug stores, or represent small chains covering one or more counties. These pharmacies offer personalized service and a tradition of being a patient advocate - often providing answers to their customer's questions regarding medications, looking out for adverse reactions and communicating with the physician when a question of dosage or reaction occurs.

Organizing these smaller entities into a network with contractual obligations to a central agency that acts as a Management Services Organization (MSO), which in turn, contracts with purchasers, has employers intrigued and supportive because many of these hometown stores can also be an advocate for the employer - a resource needed more and more as value based payment emerges.

These independents not only offer dispensing, but also agree to offer Medication Therapy Management (MTM) to help the patient reconcile drugs, vitamins and even nutrition that may be playing a part in their drug therapy. Many of these stores can also offer medical appliance and durable medical equipment at less than the hospital outpatient cost. In addition, as a local provider, they are predisposed to working closely with PCPs to help introduce alternative drug therapies that may be less costly to the patient and the employer, but are just as effective as standard therapies.

Even if this connectivity is missing electronically, one can still work with purchasers to make sure the patient is adherent and getting their 30 day supply refilled on time. This can be a mutual responsibility between payer and pharmacists. The savings of substitution, the ability to control use of specialty drugs as necessary, and the coordination of care to assure adherence are all part of this new model.

Where does the PBM fit? The PBM can still process drug claims for the employer and share this with the pharmacy MSO, but it relinquishes control of the network to the employer. The employer may decide to run two networks—one of independents (the high performance network) and one of the big box and chains (the general network). If the employer really wants to test the effectiveness of the networks, they could also pay 100% of the high performance network prescription and MTM fees and 80% of the non-high performance network. This gives employees the choice but also incents new business to those who have little preference, but want to save money. It secures the patients for the local pharmacy, which creates competition for the chain stores.

Drug stores as care outlets versus retail vendors can make a very big difference in areas of managing drug costs and adherence. The leading cause of readmission to a hospital is non-adherence to drug therapy - which puts people in the ER. This is a classic example of a Preventable and Avoidable Cost (PAC) that could be better managed on an outpatient basis by having care coordinated by the pharmacists and the PCP.

While the cost of pharmacy will continue to rise as medical research promotes more effective drugs, we know employers and health plans can better manage utilization and patient experience at the delivery point of care, and that is, for many, the local home town pharmacist.


The Role of Master Data Management in Health Care

By Claire Thayer, August 25, 2015

Health Market Science tells us that Master Data Management (MDM) in health care encompasses everything from patient data to provider data detailing the treatments, procedures, modalities, products and processes which govern and describe patient interactions and outcomes. A recent KPMG survey finds that a slight 10% of health care organizations are effectively using advanced data collection and analytic tools in this regard.  MCOL’s recent infoGraphoid outlined summary findings from the KPMG survey, along with core customer entity types, key barriers to properly implementing data and analytic tools and primary main drivers to MDM:

MCOL’s weekly infoGraphoid is a benefit for MCOL Basic members and released each Wednesday as part of the MCOL Daily Factoid e-newsletter distribution service – find out more here.


Seven Things to Know About Medicaid Going Forward

By Clive Riddle, August 20, 2015

  1. The most current CMS report indicates total Medicaid and CHIP enrollment of 71,637,638; with 509,082 additional people were enrolled during the past 30 days in the most recent reporting month (May 2015.)
  2. Total Medicaid spending will be close to $500 billion going into 2016.
  3. Since initial Marketplace open enrollment period began in October 2013, more than 12.8 million additional individuals are enrolled in Medicaid and CHIP as of May 2015, more than a 22 percent increase (Among states participating in Medicaid expansion, enrollment rose by 29.2 percent, while non participating states reported an increase of approximately 9.5 percent.)
  4. Regarding where states stand on medicaid expansion decisions, 20 states are not expanding Medicaid; 25 states (count includes the District of Columbia) are expanding Medicaid ; 5 states are expanding Medicaid, but using an alternative to traditional expansion; and 1 state is expanding Medicaid; pending federal waiver approval.
  5. According to the Center for Health Care Strategies, nine states have an active Medicaid ACO program (Oregon, Utah, Colorado, Minnesota, Iowa, Illinois, New Jersey, Vermont, and Maine) and ten states are pursuing Medicaid ACOs (Washington, Michigan, Alabama, North Carolina, Virginia, Maryland, New York, Massachusetts, Connecticut, and Rhode Island.)
  6. The GAO recently listed four key issues facing the Medicaid program, in their brief MEDICAID: Key Issues Facing the Program, including (A) access to care; (B) transparency and oversight (lack of complete and reliable data on states' spending, and need for improved HHS management of state demonstrations; (C) program integrity (the program's size and diversity make it vulnerable to improper payments). ; and (D) federal financing approach (automatic federal assistance during economic downturns and more equitable federal allocations of Medicaid funds to states.)
  7. Medicaid Managed Care now involves 39 states that contract with comprehensive MCOs for Medicaid, with around 74 percent of beneficiaries receiving care through these plans. CMS recently issued the first major proposed rule addressed Medicaid Managed Care since 2002, which addresses issues including Network Adequacy; Medical Loss Ratio; Actuarially Sound Capitation Rates; Quality of Care Standards; Appeals and Grievances ; Beneficiary Enrollment Protections; Utilization Management; Managed Long-Term Services and Supports; State Monitoring Standards; and Information Standards.